A recent report by the Organisation for Economic Co-operation and Development (OECD) reveals significant disparities in government for wind turbine manufacturers in China and Europe. The report highlights that Chinese manufacturers have consistently received higher government-backed compared to their European counterparts for over a decade. 412w13

In response to concerns over unfair competition, the European Commission launched an investigation into Chinese wind turbine suppliers under the Foreign Subsidies Regulation (FSR) in April 2024. The Commission suspects that the Chinese government’s financial backing is distorting the wind energy market, and it has sweeping powers, from document disclosures to contract cancellations, to ensure a fair playing field between European and non-European manufacturers.

OECD report findings 3a4md

The OECD report provides compelling evidence that China-based manufacturers are the largest recipients of government subsidies, benefiting from grants, tax breaks, and below-market financing from state-owned banks. These advantages have propelled China’s rapid growth in wind turbine manufacturing capacity, far exceeding the level of available to European manufacturers. The report’s data shows that subsidies in China are disproportionately higher when compared to OECD countries, fueling concerns over market distortion.

Impact on European manufacturers 1e3953

Phil Cole, Director of Industrial Affairs at WindEurope, emphasized the importance of fair competition in the wind energy sector, stating, “The European wind industry is not against competition. But that competition must be fair. Otherwise, we risk delaying not only the European energy transition but also the global transition.”

These generous subsidies have allowed China to build significant manufacturing overcapacity, leading to intense price competition and concerns over market imbalance. In addition, Chinese manufacturers are offering deferred payment that European manufacturers cannot match, further disadvantaging the European sector.

Risks to European energy security 702a4v

“China’s overcapacity issues must not distort Europe’s established market for wind energy,” said Cole. “Without European manufacturing and a strong European supply chain, we lose our ability to produce the equipment we need – and ultimately risk our energy and national security.”

The report also points out China’s dominance in the supply of rare earth minerals, essential for manufacturing wind turbine components like permanent magnets. Approximately 70% of the country’s rare earth output is controlled by a single state-owned enterprise, the China Rare Earth Corporation, giving Chinese manufacturers a competitive edge. Additionally, the cost of materials used in wind turbine production in OECD countries is nearly 40% higher than in China, further exacerbating the imbalance.

Europe’s response: The Net Zero Industry Act 235w6

In response, Europe is taking steps to strengthen its clean-tech manufacturing base. The European Commission’s Net Zero Industry Act (NZIA), introduced in 2024, aims to increase EU wind turbine manufacturing capacity to 36 GW by 2030. Europe is already investing more than €11 billion to expand factories and build new ones, but further progress is essential to counteract market distortions. The NZIA must be implemented swiftly, with a focus on diversifying raw material supply chains, fostering innovation, and streamlining permitting processes.

The future success of the European wind manufacturing industry will depend on global cooperation, adherence to market dynamics, and respect for international trade laws. Moving forward, European policymakers must ensure that trade fairness benefits all countries involved.